OVERVIEW OF OUR PERFORMANCE, OPERATING ENVIRONMENT, STRATEGY AND OUTLOOK
References to operational variances pertain to period-over-period changes that exclude the impact of foreign exchange rates. Although foreign exchange rate changes are part of our business, they are not within our control and since they can mask positive or negative trends in the business, we believe presenting operational variances excluding these foreign exchange changes provides useful information to evaluate our results.
Our Business and Strategy
We apply science and our global resources to bring therapies to people that
extend and significantly improve their lives through the discovery, development,
manufacture, marketing, sale and distribution of biopharmaceutical products
worldwide. At the beginning of our fiscal fourth quarter of 2021, we reorganized
our commercial operations and began to manage our commercial operations through
a new global structure consisting of two operating segments:
For additional information about our business, strategy and operating environment, see the Item 1. Business section and Overview of Our Performance, Operating Environment, Strategy and Outlook section within MD&A of our 2021 Form 10-K.
Our Business Development Initiatives
We are committed to strategically capitalizing on growth opportunities, primarily by advancing our own product pipeline and maximizing the value of our existing products, but also through various business development activities.
Our significant recent business development activities include the transactions discussed in Note 2 and the following:
Acquisition of Biohaven--In
This agreement follows on the
Acquisition of ReViral--In
For a description of the more significant recent transactions through
Our First Quarter 2022 Performance
Revenues--Revenues increased
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Revenues in the first quarter of 2022 were unfavorably impacted by approximately
See the Analysis of the Condensed Consolidated Statements of Income--Revenues by Geography and Revenues--Selected Product Discussion sections for more information, including a discussion of key drivers of our revenue performance. For information regarding the primary indications or class of certain products, see Note 13C.
Income from Continuing Operations Before Provision/(Benefit) for Taxes on
Income--The increase in Income from continuing operations before
provision/(benefit) for taxes on income of
See the Analysis of the Condensed Consolidated Statements of Income within MD&A and Note 4 for additional information.
For information on our tax provision and effective tax rate, see the Provision/(Benefit) for Taxes on Income section within MD&A and Note 5.
Our Operating Environment
We, like other businesses in our industry, are subject to certain industry-specific challenges. These include, among others, the topics listed below, as well as in the Item 1. Business--Government Regulation and Price Constraints and Item 1A. Risk Factors sections, and the Overview of Our Performance, Operating Environment, Strategy and Outlook--Our Operating Environment section of the MD&A of our 2021 Form 10-K.
Intellectual Property Rights and Collaboration/Licensing Rights--The loss, expiration or invalidation of intellectual property rights, patent litigation settlements with manufacturers and the expiration of co-promotion and licensing rights can have a material adverse effect on our revenues. Certain of our products have experienced patent-based expirations or loss of regulatory exclusivity in certain markets in the last few years, and we expect certain products to face increased generic competition over the next few years. While additional patent expiries will continue, we expect a moderate impact of reduced revenues due to patent expiries from 2022 through 2025. We continue to vigorously defend our patent rights against infringement, and we will continue to support efforts that strengthen worldwide recognition of patent rights while taking necessary steps to help ensure appropriate patient access.
For additional information on patent rights we consider most significant in relation to our business as a whole, see the Item 1. Business--Patents and Other Intellectual Property Rights section of our 2021 Form 10-K. For a discussion of recent developments with respect to patent litigation, see Note 12A1.
Regulatory Environment/Pricing and Access--Government and Other Payer Group
Pressures--Governments globally, as well as private third-party payers in the
Product Supply--We periodically encounter supply delays, disruptions and
shortages, including due to voluntary product recalls. In response to requests
from various regulatory authorities, manufacturers across the pharmaceutical
industry, including
The Global Economic Environment
In addition to the industry-specific factors discussed above, we, like other businesses of our size and global extent of activities, are exposed to economic cycles. For additional information, see the Overview of Our Performance, Operating Environment, Strategy and Outlook--The Global Economic Environment section of the MD&A of our 2021 Form 10-K.
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COVID-19 Pandemic--The COVID-19 pandemic has impacted our business, operations and financial condition and results.
Our Response to COVID-19
•Comirnaty/BNT162b2:
•We have collaborated with BioNTech to jointly develop Comirnaty/BNT162b2, a
mRNA-based coronavirus vaccine to help prevent COVID-19. For additional
information, see the Product Developments section of this MD&A. We continue to
evaluate our vaccine, including for additional pediatric indications, and the
short- and long-term efficacy of Comirnaty. We are also studying vaccine
candidates to potentially prevent COVID-19 caused by new and emerging variants
or an updated vaccine as needed.
•The companies have entered into agreements to supply pre-specified doses of
Comirnaty in 2022 with multiple developed and emerging countries around the
world and are continuing to deliver doses of Comirnaty to governments under such
agreements. We also signed agreements with multiple countries to supply
Comirnaty doses in 2023 and are currently negotiating similar potential
agreements with multiple other countries. We anticipate delivering at least two
billion doses to low- and middle-income countries by the end of 2022-one billion
that was delivered in 2021 and one billion expected to be delivered in 2022,
with the possibility to increase those deliveries if more orders are placed by
these countries for 2022. One billion of the aforementioned doses to low- and
middle-income countries are being supplied to the
•As of
•Paxlovid:
•In
•We continue to evaluate Paxlovid in other populations, including in patients
with a confirmed diagnosis of SARS-CoV-2 infection who are at standard risk
(i.e., low risk of hospitalization or death) (Phase 2/3 EPIC-SR (Evaluation of
Protease Inhibition for COVID-19 in Standard Risk Patients)) and in
non-hospitalized, symptomatic, pediatric patients with a confirmed diagnosis of
COVID-19 who are at risk of progression to severe disease (Phase 2/3 study,
EPIC-PEDS (Evaluation of Protease Inhibition for COVID-19 in Pediatric
Patients)). In
•We have entered into agreements with multiple countries to supply pre-specified
courses of Paxlovid, such as the
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share intellectual property related to our oral COVID-19 treatment to enable
qualified generic medicine manufacturers worldwide to manufacture and supply
generic versions of this treatment to 95 low- and middle-income countries,
pending authorization or approval, covering up to approximately 53% of the
world's population. MPP has entered into sublicense agreements with 36 generic
manufacturers. In addition, in
•Pfizer has capacity to manufacture up to 120 million treatment courses by the end of 2022 (and is on track to produce 30 million courses in the first half of 2022 with the ability to produce the remaining 90 million courses in the second half of 2022), depending on the global need, which will be driven by purchase agreements.
•As of
Impact of COVID-19 on Our Business and Operations
As part of our on-going monitoring and assessment, we have made certain assumptions regarding the pandemic for purposes of our operational planning and financial projections, including assumptions regarding the duration, severity and the global macroeconomic impact of the pandemic, as well as COVID-19 vaccine and oral COVID-19 treatment revenues, supply and contracts, which remain dynamic. Despite careful tracking and planning, we are unable to accurately predict the extent of the impact of the pandemic on our business, operations and financial condition and results due to the uncertainty of future developments. We are focused on all aspects of our business and are implementing measures aimed at mitigating issues where possible, including by using digital technology to assist in operations for our commercial, manufacturing, R&D and corporate enabling functions globally.
As discussed in our 2021 Form 10-K, apart from our introduction of Comirnaty/BNT162b2 and Paxlovid, our business and operations were impacted by the pandemic in various ways; certain of those impacts have continued in 2022. For additional detail and discussion on the impact of the COVID-19 pandemic on certain of our products, sales and marketing, supply chain and clinical trials, see the Analysis of the Condensed Consolidated Statements of Income-Revenues by Geography and Revenues-Selected Product Discussion sections within this MD&A and the Overview of Our Performance, Operating Environment, Strategy and Outlook-The Global Economic Environment-COVID-19 Pandemic section of the MD&A of our 2021 Form 10-K.
We will continue to pursue efforts to maintain the continuity of our operations while monitoring for new developments related to the pandemic. Future developments could result in additional favorable or unfavorable impacts on our business, operations or financial condition and results. If we experience significant disruption in our manufacturing or supply chains or significant disruptions in clinical trials or other operations, if demand for our products is significantly reduced as a result of the COVID-19 pandemic, or if demand for our COVID-19 vaccine or oral COVID-19 treatment is reduced or no longer exists, we could experience a material adverse impact on our business, operations and financial condition and results.
For additional information, see the Item 1A. Risk Factors-COVID-19 Pandemic section and the Overview of Our Performance, Operating Environment, Strategy and Outlook section of the MD&A of our 2021 Form 10-K.
SIGNIFICANT ACCOUNTING POLICIES AND APPLICATION OF CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS
For a description of our significant accounting policies, see Note 1 in our 2021 Form 10-K. Of these policies, the following are considered critical to an understanding of our consolidated financial statements as they require the application of the most subjective and the most complex judgments: Acquisitions (Note 1E); Fair Value (Note 1F); Revenues (Note 1H); Asset Impairments (Note 1M); Tax Assets and Liabilities and Income Tax Contingencies (Note 1Q); Pension and Postretirement Benefit Plans (Note 1R); and Legal and Environmental Contingencies (Note 1S).
For a discussion about the critical accounting estimates and assumptions
impacting our consolidated financial statements, see the Significant Accounting
Policies and Application of Critical Accounting Estimates and Assumptions
section within MD&A in our 2021 Form 10-
For a discussion of a recently adopted accounting standard, see Note 1B. For a discussion of presentation changes for Acquired in-process research and development expenses, see Note 1D.
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